Franklin & Marshall College Franklin & Marshall College

Antonio Callari: Director, Local Economy Center

Session: Introduction to Lancaster Economy Atlas

Introduction to Lancaster Economy Atlas

I would like to add my welcome to all of you for taking the time on a Saturday to attend this conference. I will be talking a little about the research you have seen displayed on the posters outside and about the nature of the conference program. Before I do that, however, I want to say a few things about the Local Economy Center and to thank all of the people who have made both that Center and this conference possible.

Those of us who planned this conference meant it to be at the core of the work of the Local Economy Center. We see the conference as a work of community, as a way of engaging students and scholars with a diverse group of community interests on the matter of this community’s economic future. The purpose of the Local Economy Center too is, above all, to enable and facilitate on an ongoing basis the coming together of diverse interests and groups in the community to forge a common sense of destiny. And so we thought that the Conference itself would be a proper occasion for launching publicly the formal establishment of the F&M LEC.

LEC MISSION STATEMENT

As its Mission Statement indicates, the Local Economy Center will exist as the cooperation among students, faculty, and a variety of local economic development organizations, private and public, small and large, grass roots and established, all working toward forging shared understandings and a common and inclusive strategy for the economic well being of the community.

So, we start with this conference. And I will need to point out that indeed both it and the Center are already themselves the products of the collaboration of many interests. This will be apparent from the many thanks I am about to give.

For the very existence of the Local Economy Center, I would like to start by thanking the Administration of F&M. I want to thank Provost Pipes not only for his remarks earlier, but also for his recognition of the value of the increasing interests of students and faculty in practical questions of community, something he demonstrated by creating the F&M C.L.A.S. It is that same recognition which, I believe, also stands behind his endorsement of the Local Economy Center. I also want to thank President Fry for his vigorous civic engagement. It did not take him long to set a great example and to become a source of renewed energy for faculty and students interested in working with the community. I want to thank as well the many talented students who have worked on various research projects throughout the subterranean existence the Center has had up to this year. In particular today, I want to thank the students who have worked with me on the slide presentation for today’s conference.  (Slide 2) They are Jonathan Bardord, Jessica Schmidt, Ahmad Sheikh, Manav Patnaik, and Russell Turnquist, who, by the way, came all the way down from the Boston area to attend this conference. Would all of you please stand! … I think they deserve a warm applause. There are, then, colleagues, who also have worked with me and with students, both here and elsewhere, to nurture the energy behind the idea of a Local Economy Center: Linda Aleci and Sean Flaherty from right here, at F&M, and Mike Gumpper and Khalil Hamid from Millersville. To them I’d like to add other colleagues, again both from F&M and other places, who have expressed an interest in working on the local economy project. The people of the F&M Floyd Institute are due my gratitude: Berwood Yost, Christina Abbott, Jennifer Harding, and Angela Knittle without whose interest and professionalism I doubt we would have been able to move ahead and to set up the Center. And, last but not least, the existence of the Center is also due to the interests of the local community, an interest which both the Economic Development Company of Lancaster County and the Lancaster County Planning Commission have expressed concretely and substantively by being cosponsors and contributors to this Conference.

So, the Center is really the coming together of a number of different constituencies, and it is this aspect of it that I think gives it the opportunity and the means with which to be a real place of community and really at the service of the community.

Coming now to the Conference in particular, the list of thanks, and with it the plurivalence of community, grows.

Coming now to this conference, in addition to expressing our gratitude to EDC and of LCPC, I want to declare a debt to the F&M CLAS and its Director, Eliza Reilly, for the support she has given to this gathering. I need to say in particular that this CLAS support is made possible by the Seachrist Public Entrepreneurship Fund. Bill Seachrist, who was a beloved trustee of the College, had a great sense of community entrepreneurship and was very encouraging to those of us who were studying and working in the community, and I am sure he would be very happy to see you all here today. I must also thank The F&M Public Affairs Fund and the F&M Economics Department for their contributions. And, of course, I must thank as well a number of people who have contributed many hours to organizing the conference. Berwood Yost of the Floyd Institute and Professor Linda Aleci have been working with me on every part of this conference, from its conceptual structure down to its minute organizational details. This conference really would not have been possible, or even thinkable, without them.

I must also mention a number of other people, who have helped in a number of ways: Joe Corvino and Dobromir Dotov for their help with the Technology of this room; Jordan Humphrey of CLAS and Mrs. Mason of the Economics Department, who worked on registration and food and budget matters; Angela Knittle, George Kyriakopolous, and Jennifer Harding who have volunteered their day to make sure that things work out smoothly today. I also want to thank John Svatek, who did the art work for our poster and who keeps on impressing everyone with his esthetic communicative sense. And a special, special thank, finally, goes to Christina Abbott from the Floyd Institute, who worked very hard to help with the poster display and in other ways. In fact, I think her help and support, and confidence, is what kept us from falling apart under the stress of the last week.

And of course, I want to thank all of you who have agreed to be part of the conference panels.

I can only hope I haven’t forgotten anybody.

Let me pass now to saying a few words about the poster display you have seen outside this auditorium and about the work ahead for the Local Economy Center.

The posters out there (the posters comprising the Lancaster Economy Atlas, that is) tell us a few important things about the Lancaster economy. They do not in any way tell us everything we know--we know other things that are not on display, and we know them both from our own work and from the work of others, at Millersville University and at the Workforce Investment Board, for example. And there is much more that we yet have to ask about or know. We have it as a goal for the Local Economy Center to produce an Atlas which will gather together all that we know, an Atlas which will grow over time as we ask more questions, and new questions, and do the work to answer them. But the posters do give us some important information on economic trends and reveal something disturbing about the Lancaster economy.

This disturbing element is that, beginning with the mid 90s, Lancaster entered into a sustained phase of stagnant economic growth. The revealing statistic here is that, over time, per-capita income in Lancaster passed from being above to being below the U.S. level.

SLIDE #8

SLIDE #45

These two slides show the slippage.

The question, then, is what accounts for this Lancaster slippage?

One element that is not responsible for this slippage is the work-force participation rate of Lancastrians. The slippage in per-capita income does not occur because Lancastrians began to work less than the average American. In fact, employment as a percentage of total population in Lancaster has remained above the level of the U.S., or of the state of Pennsylvania as a whole.

SLIDE #86 

SLIDE #87

Lancastrians, in other words, have continued to work hard, to work more than the average American, and yet their incomes have been falling below that of the average American.

So, what else can account for this Lancaster slippage?

From the floor: Mr. Byrne

Just a quick question. Is this income you are talking about pre-tax or after tax?

Antonio Callari

It’s personal income, before income taxes. It’s per-capita personal income, and that’s the total personal income, which is by definition before income taxes, divided by the number of people in the given area.

Mr. Byrne

So, if people in New Jersey are paying 10% income taxes versus the 3% here, we could still be better off in Lancaster!

Antonio Callari

Yes, that could be. It could be. But we would be, clearly, that much better off, as we had been before, if the base per-capita income level had not dipped down.

Mr. Byrne

No, well .. Taxes, for example, in New Jersey and Massachusetts have gone up over the last three or four years …

Also, are these data adjusted for the cost of living. These are raw numbers that really ..

Antonio Callari

No, they are not adjusted for the cost of living. You mean the fact that the cost of living might be lower in Lancaster than elsewhere?

Mr. Byrne

So, is this ‘real" purchasing power?

Antonio Callari

It’s real in terms of the cost of living at the national average, but it does not reflect the specificity of the cost of living in Lancaster vis-à-vis, say, New Jersey, or Washington D.C.

Now, that is a very important question to pursue on its own, but it is—I don’t want to say that it is besides the point for what we are doing here, but there is a much larger point than that, and that larger point is that, even without accounting for any differences in the cost of living, Lancaster’s per-capita income used to be higher than the U.S. average and now it has come to be less than the U.S. average.

[Note to the reader. Since the time of the conference, we have looked at the matter of cost of living differentials. This (Slide #9) displays a measure of the cost of living in Lancaster relative to a national average as calculated by ACCRA—formerly the American Chamber of Commerce Research Associatian. Calculated quarterly from 1990 to 2001, this cost of living index shows that, at least for the household class to which it refers—the upper income quintile of households—except for three of the quarters over the 1999-2001, the cost of living in Lancaster has been higher than the national average. Were it to be corrected for cost-of-living differentials, then, the values of Lancaster per-capita income relative to the U.S. would be adjusted downward for most of the years of the ACCRA calculations.

It is important to be careful in any interpretation of the meaning of cost-of-living index deviations from a national norm. That an area’s cost of living index is higher (or lower) than the national average may mean very different things, depending on a variety of circumstances. Thus, on the one hand, a lower than average cost-of-living might mean that the area is an attractive area, that it may attract workers and investments—the lower than average cost of living would be an stimulus to the local economy. On the other hand, however, a lower than average cost of living might be an index of stagnation in the local economy—if, for example, the cost of living is held back by stagnating real estate values, or by lagging prices charged by local producers in response to lagging demand.]

Mr. Byrne

But the relative taxes have changed.

Antonio Callari

That may be, but it doesn’t change what these statistics are telling us ..

Mr. Byrne

Yes it does!

Antonio Callari

Well, maybe we can talk more about that later. It does for some issues, but it doesn’t for other issues. The point I’m making here is just about how productive we have been, how productive the Lancaster economy has been, over the time period we are considering, relative the level of productivity of the U.S. economy and on a per-capita basis. And clearly, we have gone from being more productive than the average to being less productive than the average. From that, then, lots of other things flow.

Now, as I was saying, we can continue this conversation later on, but I would like now to move on to the rest of my presentation.

As I was saying, then, the reason for the dip of the Lancaster per-capita income below the U.S. levels is not that we began to work less. So, what else could explain the dip? Most of the remainder of the slide display tries to answer this question—although the answer it gives is of a general nature and there is still plenty of work to be done.

The answer, it has seemed to me and to my students, has two parts. The first part has to do with the industrial transformation of the economy. Everyone knows that the U.S. economy has transformed itself from a manufacturing economy to a service economy. Lancaster’s economy has seen some of this transformation, but the transformation has proceeded very slowly in Lancaster relative to rest of the economy.

Manufacturing still accounts for a much larger share of income in Lancaster than it does in the nation as a whole (about 13% more), and at the same time, services account for a smaller share of earnings in Lancaster than in the nation as a whole (about 7% less).

The adaptive sluggishness of the Lancaster economy, it seems to us, may explain some of the per-capita income slippage. It is true that manufacturing jobs have traditionally paid better than service jobs, but with time that differential has eroded and any advantages to an economy that came from a concentration of manufacturing activities may not be playing as much of a role now as it might have in the past in sustaining high per-capita income levels. Manufacturing areas in general, in fact, have been experiencing a progressively larger dipping of average annual wage incomes below the level of average annual wage incomes in the nation as a whole.

SLIDE 65

The second element that emerges from our research is that wages in Lancaster have generally been lower than in other benchmark areas. Wage levels have been lower in Lancaster than they have been in other manufacturing areas,

( as we can see from this slide #65  still).

They are lower in Lancaster than they are in PA or in the US on the average and for virtually every occupation (the notable exception being that for healthcare professionals).

$3780 less income!

The counterpart to the lower wage levels in Lancaster is that the County’s distribution of income seems to have become more heavily skewed toward property incomes (interest, dividends, and rents) than is the case for the U.S. generally--less favorable to wage earners than is the case for the U.S. generally.

We found that this pattern is characteristic of areas and regions whose per-capita income performance is, generally, not as good as the national average. We get a sense from our research that, over the course of the last 30 years, the regions that have done better than average have been regions that have seen some movement toward a larger labor share and a lower property share of income, whereas regions that have not performed as well have been regions that have had the reverse trend toward a lower wage share and a higher property share. Lancaster, it seems, fits this latter correlation.

Now, for sure, establishing these correlations is not sufficient. Many steps must be taken in order to link, in a cause and effect way, trends in the changing industrial composition of the economy and in the changing income distribution patterns to the overall performance of a particular place like Lancaster. These correlations thus, are not the end of our story. They are rather only the beginning. How to complete the story, what kind of story to tell, is a task that, we think, the local community will want the Local Economy Center to undertake.

What we have done so far, in other words, is only the tip of an iceberg, and a lot more work remains to be done in order to complete our Atlas of the Lancaster economy.

Now, in a way completing the Map of the Lancaster economy will mean getting more data to answer more fully the question of "what happened"? More data to help us make those cause-and-effects linkages between the changing sectoral composition and income distribution patterns of the national and local economy. That is something we surely will need to do.

Now, ‘maps’ are usually not consulted by people because they want to retrace where they have been. People use ‘maps’ more often to find out where they are going, to look toward the future. To look to the future, in this case, means to try to figure out what to do next, where to find the energies that will make the local economy work better; it means to develop a set of standards by which we judge the success of an economy, standards which can be kept in mind when devising policies; it means finding new things to do and finding new ways of doing things. This finding of new things and new ways is indeed what is in the mind of all of us today, and we will begin what I hope will be a lasting and imaginative conversation for all of us.

Let me conclude by saying that we have structured today’s conference in a way that reflects some important needs. First, there is the need to make available to ourselves the best thinking we can find coming from people whose job is to think about how communities can face the challenge of surviving and keeping healthy in a world that is increasingly indifferent, and sometimes hostile, to "community." Second is the need for communities always to try to strike a balance between the given and the new, between given ways of thinking and new and different ways of thinking. Our panels try to cover both sides of this balance. The panel we have on "The Street" looks at some important questions about the performance of the economy as it has been traditionally tracked: investments, jobs, wages, income levels, poverty. The afternoon panel on "Food systems" represents an important capability that communities facing change need to nurture: that is the ability to think outside the box, in this particular case: how to create strength in a local economy by focusing on use-value networks. I like to thank you all again for being here, and we hope you will find today useful and enjoyable.